A US defence department analyst has been arrested and charged with illegally passing on information about potential attacks on US forces in Iraq.

Larry Franklin, 58, is accused of passing defence secrets to two members of a US pro-Israel group in June 2003.

He appeared in a district court in Alexandria, Virginia, where he was released on $100,000 bail on condition he hand over his firearms and passport.

Mr Franklin's lawyer says he expects his client will plead not guilty.

Israeli spy ban

A preliminary hearing has been set for 27 May.

Israel has denied any involvement in the case.

"Israel is not operating in the United States in any way that is liable to hurt US security... Israel has nothing to do with the matter," Foreign Minister Silvan Shalom told Israeli TV.

Israel says it has had a ban on espionage in the US since the scandal over Jonathan Pollard, a civilian intelligence analyst for the navy caught spying for Israel in 1985 and sentenced to life in prison.

The charge against Mr Franklin carries a maximum penalty of 10 years in prison.

Mr Franklin worked at the Pentagon's Iran Desk and held top secret security clearance until it was suspended in June last year.

Lobby group

The criminal complaint alleges that on 26 June 2003 Mr Franklin had lunch at a restaurant in Arlington, Virginia, with two individuals and passed them information.

He allegedly said the information was "highly classified" and asked them not to "use" it.

The US justice department did not name the two men, but law enforcement sources said they belonged to the influential lobby group, the American Israel Public Affairs Committee (AIPAC).

The charge sheet also said Mr Franklin was accused of passing classified information to a foreign official and members of the media.

It said he had more than 80 classified documents at his home, which was not an authorised location.

The investigation was originally opened into whether the AIPAC group had been passed data on Iran. It is not known where Mr Franklin's arrest leaves that inquiry.